Securities regulators have ordered Citigroup Inc. to pay $54 million to two investors who suffered hefty losses in several municipal bond hedge funds between 2002 and 2007.
An arbitration panel of the Financial Industry Regulatory Authority in Denver awarded the investors $34.1 million in compensatory damages and $17 million in punitive damages in an order signed Monday.
The judgment also included attorneys' fees and other costs.
Investors Jerry Murdock Jr. and Gerald Hosier filed claims with regulators in June 2009 over their losses in the MAT Finance and ASTA Finance funds launched by Citigroup Global Markets Inc.
Citigroup marketed the funds as being of little more risk than municipal bonds, when in fact they were far more risky, Philip Aidikoff, an attorney who represented the investors, said Tuesday.
The investors' losses in one fund, the MAT Five, exceeded 90 percent, Aidikoff said.
In all, the investors lost $26.9 million combined, but the compensatory damages were adjusted higher to account for how much money they would have made had their money been invested in municipal bonds, Aidikoff said.
In a statement, Citigroup said it is disappointed with the decision and is reviewing its options.
Citigroup shares were unchanged in aftermarket trading. The shares ended Tuesday's regular session up 2 cents to $4.55.